Shares in ACCO Brands Corporation (NYSE:ACCO) shot up by a fifth on Monday after the company’s third quarter EPS beat estimates and it unveiled an acquisition.
The stock closed at $10.95, up 20.2%, on volume of 2.4 million shares.
Acco Brands is a designer, marketer and manufacturer of branded products spanning the business, academic and consumer sectors and its products are sold in over 100 countries around the globe.
ACCO Brands Corporation (NYSE:ACCO) acquires Esselte
Acco signed off on a deal to acquire Esselte Group Holdings AB, a European office products company, from private equity firm J.W. Childs for $333 million in cash.
Acco’s strategy is to expand its European reach by merging Esselte’s operations with its own business in Europe.
The payoffs from the deal include annualized cost synergies of approximately $23 million, within three years, resulting in adjusted EPS accretion of $0.12 in the first year. Additionally, the combination will generate additional free cash flow of about $20 million in the first year, rising to about $55 million in year 3.
“The acquisition supports our brand leadership strategy, creates a pan-European leader in branded business products and further solidifies ACCO Brands’ position as a leading global marketer and manufacturer of branded business, academic and consumer products,” said Boris Elisman, chairman, president and chief executive officer of ACCO Brands Corporation.
Esselte clocked sales of $485 million last year and reported adjusted EBITDA of $60 million. On the conference call, Elisman called the acquisition a “financially compelling transaction” that will triple the company’s European business to $600 million, and “add scale, attractive brands, channel expansion, cost synergies, management talent and financial accretion.”
ACCO Brands Corporation (NYSE:ACCO) Q3 beats on earnings
Acco reported Q3 EPs of $0.29, which beat by $0.01, and revenue of $431.3 million which missed by $0.95 million, but was up 4.3% year on year.
Though International sales rose 23% to $128.5 million, North American sales declined 2% to $273.3 million.
For 2016, the company expects net sales to increase in the low single digits and EPS in the range of $0.84 – $0.86.
Technically, the stock has broken out of a falling wedge on its weekly chart, and may be expected to resume its uptrend.